Torrid Holdings Inc.

Greetings and welcome to the Torrid Holdings, Inc. First Quarter Fiscal 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Chinwaya Bella, Chief Accounting Officer of Torrid Holdings. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining Torrid's call today to discuss our financial results for the first quarter of fiscal 2023, which we released this afternoon and can be found on our website at investors.torrid.com. With me today on the call are Lisa Harper, Chief Executive Officer of Torrid, Mark Mazzico, Chief Commercial Officer, and Paula Dempsey, our Interim Chief Financial Officer. Before we get started, I would like to remind you of the company's safe harbor language, which I'm sure you're familiar with. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements may include, but are not limited to, statements containing the words expect, believe, plan, anticipate, will, may, should, estimate, and other words and terms of similar meaning. All forward-looking statements are based on current expectations and assumptions as of today, June 7, 2023. These statements are subject to risks and uncertainties that could cause actual results to differ materially. For further discussion of risks related to our business, see our filings with the SEC. This call will contain non-GAAP financial measures such as adjusted EBITDA. Reconciliations to these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. With that, I will turn the call over to Lisa.

Thanks, Chin-Wei. Good afternoon, everyone, and thank you for joining us for a discussion of our first quarter performance. Joining me on the call today is Mark Mazzico, Chief Commercial Officer. Mark will provide an overview of the recent developments and our key focus areas in merchandising and marketing. Also on the call with me is Paula Dempsey, our interim CFO. Paula has extensive experience in the retail sector where she has held senior leadership roles in publicly held companies in finance and financial planning and analysis, and I'm excited to work closely with her. She will provide an overview of our first quarter financial results, as well as our guidance for the remainder of fiscal 2023. During the quarter, we managed our business prudently and delivered adjusted EBITDA results in line with our expectations, despite the headwinds created by the economic landscape and weather. While traffic was volatile and challenging both in-store and online, we experienced good momentum in terms of conversion and average unit retail. These positive indicators demonstrate the effectiveness of our strategies to enhance customer engagement and loyalty. Our commitment to operational efficiency and prudent cost management enabled us to generate solid operating profits despite lower traffic trends. During the quarter, we made the strategic decision to pull back on certain promotions given the inconsistent traffic patterns. Our focus in the first quarter continued to be aligning our inventory levels, and we are pleased with the progress we made. We ended the quarter with inventory levels down 2% compared to the same period last year. Excluding approximately 10 million of early inventory receipts, our inventory was down 8% compared to Q1 of fiscal 2022. We are committed to maintaining optimal inventory levels, diligently monitoring them, and adopting a dynamic approach to adapt to the ever-changing environment. During this challenging period of trying to best predict customer behavior, we have remained steadfast in our commitment to make the right investments for the long term. We continue to invest in strategies that will drive growth and enhance our market position. This includes strengthening our product offerings to cater to evolving customer preferences, optimizing our customer file, and expanding our store footprint. As part of our efforts to improve and enhance our product offering, we announced the return of Mark Mazzico as a member of the Torrid leadership team. In his role as Chief Commercial Officer, Mark leads merchandising, merchandise planning and allocation, marketing, and e-commerce. I'm confident in his leadership and vision for the brand. Our focus is to optimize our assortments to meet the needs of our customers and align our marketing with our offerings to create compelling and consistent messaging to our clients. We have prioritized customer engagement and loyalty. We're in the process of evolving our promotional activities, including our Tori Cash events and our loyalty program. We intend to revitalize our promotional cadence by leveraging data-driven insights, ensuring that our offers resonate with our customers on a deeper level. Our loyalty program will also undergo a significant transformation focusing on enhancing customer engagement, fostering a sense of community, and rewarding our most dedicated patrons. Through these initiatives, we are confident that we will strengthen our market position and build stronger, long-lasting relationships with our valued customers. And finally, we remain committed to our brick and mortar stores and are on track to open 30 to 40 stores for the year. Our stores play a crucial role in building brand recognition and increasing our customer file. She initiates her relationship with Tori by visiting the store to see, touch, and try on products for a perfect fit, as well as to receive personalized recommendations from our sales associates. This provides a tangible experience that can foster customer trust and strengthen her bond with the brand. We know that once our customer finds us, she extends her shopping with us through our online capabilities, resulting in a strong omnichannel. In the first quarter, online sales continue to account for more than half of our total net sales. The ability to cater to our customers' preferences for both physical and digital shopping experiences creates a seamless and convenient journey, ultimately strengthening the brand-customer relationship and driving business growth through customer file expansion. Our top priority is to maintain an unwavering dedication to our customers by providing unmatched offerings and services. They understand the importance of meeting and exceeding their expectations, especially when her wallet may be constrained. By delivering exceptional experiences, we can not only retain our existing customers, but also attract new ones, further solidifying our brand. As a leadership team, we recognize the significance of improving and streamlining our processes. It is our goal to ensure that our company remains agile, efficient, and adaptable to the evolving market conditions. To that end, we will continue to evaluate our cost structure to identify areas where we can optimize our spending while maintaining our competitive edge. The objective is to align our expenses with our strategic priorities and revenue potential. In conclusion, while the first quarter presented us with some challenges, we remain optimistic about our future. Our focus on driving store growth and loyalty remains unwavering and we will continue to adapt to the ever-evolving retail landscape. We are confident that our strategies will enable us to navigate through the current environment and position us for success in the long run. But before I turn the call over to Mark, I'd like to express my sincere gratitude to our dedicated employees who have demonstrated remarkable resilience and commitment. Their hard work and dedication are the driving force behind our achievements, and I am immensely proud to lead such a talented team.